Three men were indicted for an alleged $364 milion investment fraud scheme.

The six-bedroom Ruxton colonial was one of three million-dollar homes Kevin B. Merrill purchased in Maryland. He also bought a share in a twin-engine business jet and a fleet of Rolls Royces, Ferraris and Lamborghinis.

The 53-year-old Towson businessman funded his lavish lifestyle, federal prosecutors say, by swindling more than 400 people and businesses in an elaborate Ponzi scheme.

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Merrill was arrested Tuesday at his $1.06 million home in Baltimore County. He and his business partner, Jay Ledford, 54, of Texas and Nevada, have been indicted on federal charges of wire fraud, identity theft and money laundering. Both men could face more than 200 years in federal prison.

U.S. Attorney Robert Hur called their business model one of the largest Ponzi schemes ever charged in Maryland. Hundreds of investors around the country — retirees, small-business owners, bankers, lawyers and doctors — were duped into paying the men $364 million in the past five years, prosecutors say.

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“Most of these investors are just learning now that they may have been victimized,” Hur said.

The investors believed their money was buying bundles of debt on student loans, credit cards and car loans known as “consumer debt portfolios.” But prosecutors say the businessmen actually were funneling money from new investors to their previous investors. Sometimes, prosecutors say, the men paid an investor with the person’s own money, only returning the funds under the guise of profits.

On one occasion, an unidentified investor wired Merrill $500,000 to buy two debt portfolios. Prosecutors say Merrill sent the investor a fake document suggesting the purchase was made. But they say he actually took $54,000 to pay his previous investors, put $20,000 toward his credit card, and spent $400,000 on a rare Italian sports car, a 2014 Pagani Huayra Diablo.

Another time, prosecutors say, he used $100,000 from the same investor for a private fitness club membership near his waterfront home in Naples, Fla.

Prosecutors say Merrill used money from a group of Chicago investors last year to buy himself a $950,000 Bugatti Veyron, one of the fastest sports cars in the world. They say he freely spent the money from a group of Bethesda investors: $37,500 on watches and jewelry, $50,000 on private flights, $100,000 at a Las Vegas casino.

The judge also barred Ledford from selling homes in Las Vegas and Texas, three cars — a Ferrari, a Bentley and a Tesla — a 7 carat diamond ring, a 23 carat diamond bracelet and a Breitling watch.

The federal grand jury has indicted a third man, Cameron Jezierski, 28, of Fort Worth, Texas, for wire fraud. Prosecutors say he helped the men create fake paperwork to convince investors their money was spent on the consumer debt portfolios.

The men built an elaborate web of shell companies and bank accounts to fool investors around the country, prosecutors say. They say the men made fake spreadsheets, purchase agreements and profit projections.

“There were lies being told to investors about almost every conceivable aspect of the scheme,” said Hur, the U.S. attorney in Maryland.

To further the ruse, prosecutors say, the men formed “imposter companies” with names similar to actual consumer debt sellers, then opened bank accounts under these names. The men allegedly forged the signatures of real employees with legitimate consumer debt sellers.

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Prosecutors named five of the fraudulent companies as Global Credit Recovery, Delmarva Capital, Rhino Capital in Maryland, DeVille Asset Management and Riverwalk Financial Corp. in Texas.

A former insurance executive who was convicted of running a "Ponzi-type fraud" and accused of plotting to kill Delaware's lieutenant governor is trying to withdraw his guilty plea, arguing that prosecutors misled him.

Connecticut attorney Sergei Lemberg said he represented people in multiple lawsuits against Delmarva Capital. Each of the cases went to settlement, but Lemberg said the cases “consistently revealed a pattern of harassment, usually through repeated and frequent calls.”

Hur said federal prosecutors and FBI agents continue to search for investors who lost money. He said the number of victims may grow beyond 400. Many of them are believed to be in Maryland.

“We are still identifying victims,” said Gordon Johnson, the special agent in charge of the FBI office in Baltimore. “It’s critical to come forward so we can see how you play into this larger investigation.”

FBI agents began investigating the alleged Ponzi scheme after a tip received in the past year, Johnson said.

If the men are convicted in federal court, authorities could auction off the cars, homes and jewelry to repay investors.

The Securities and Exchange Commission has also filed a federal lawsuit against the three men and their five companies.

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A woman who answered the door at Merrill’s home on Circle Road in Towson declined to comment. Neighbors said they didn’t know the family, unusual in this bucolic stretch of Ruxton.

“We know most of the neighbors,” said Mary Bryant, who lives a few houses down.

Her husband, Fred Bryant, was amazed to hear the charges against his former neighbor. “That’s heavy stuff,” he said. A former investment banker with Alex Brown & Sons, he said “I’m very familiar with Ponzi schemes.”

Investors are seduced by promises of huge returns that seem “too good to turn down,” he said. Early investors do see huge returns — and encourage their friends to join in. But for such investors, Bryant said, “The money that I give you is coming from the next sucker.”